Appeals Court Agrees with DOL: Home Health Care Workers Employed by Third Parties Have a Right to Minimum Wage, Overtime

Domestic service workers providing either companionship service or live-in care for elderly, ill or disabled persons and who are employed by a staffing agency or other third-party employer are entitled to minimum wage and overtime for their services, according to the U.S. Court of Appeals for the District of Columbia Circuit. The ruling, issued this past Friday, overturned a lower court decision that had found new regulations issued by the U.S. Department of Labor invalid and unenforceable. Friday’s reversal means that the case will be remanded to the lower court for the grant of summary judgment to the DOL, thus reinstating the DOL’s regulations affecting more than 2 million home care workers.

(Before it was struck down this past December and January, the Final Rule was scheduled to take effect on January 1, 2015. The DOL had announced that it would not actually begin enforcing the rule until June 30, 2015. Now that the rule is “alive” again, it is not clear when it will take effect or be enforced.)

At issue in the case was a Final Rule issued by the DOL in 2013 which was set to take effect on January 1, 2015. The Final Rule made some significant changes to the regulations covering companionship workers. Companionship workers have historically been exempt from the minimum wage and overtime requirements of the Fair Labor Standards Act. Under the Final Rule, employees of third-party home health-care agencies (as opposed to employees who were employed directly by the individuals needing care or their family members) were excluded from the exemptions. In addition the definition of “companionship services” was narrowed considerably.

The Home Care Association of America and other trade associations that represent third-party employers of home-health care workers sued to stop the DOL from putting the Final Rule into effect, and in late December 2014, Judge Richard Leon ruled in their favor, vacating the part of the Final Rule that excluded employees of third-party providers from the minimum wage and overtime exemptions. Judge Leon found that the DOL’s interpretation conflicted with the intent of Congress. Three weeks later, Judge Leon also vacated the DOL’s narrow definition of “companionship services,” finding that the DOL had overstepped its bounds by trying to administratively change longstanding interpretations.

The DOL appealed both decisions, and a panel of the D.C. Circuit (Judges Griffith, Pillard, and Srinivasan) unanimously reversed Judge Leon’s ruling regarding third-party employers. The panel concluded that the case was governed by the Supreme Court decision in Long Island Care at Home Ltd. v. Coke, which had concluded in 2007 that the language of the FLSA gave the DOL discretion to apply (or not to apply) the companionship services and live-in exemptions to employees of third-party agencies. Because “the text of the FLSA does not expressly answer the third-party employment question,” and there is no “clear answer in the statute’s legislative history,” the Supreme Court said, “the question of whether to include workers paid by third-parties within the scope of the [exemption’s] definitions” is among the “details” that the statute leaves to the “agency to work out.” According to the D.C. Circuit panel, the DOL’s decision to exclude all third-party employers from the exemption, “was entirely reasonable….The DOL’s understanding is consistent with Congress’s evident intention to ‘include within the coverage of the Act all employees whose vocation is domestic service.’”

The agencies also argued that since 2007 Congress had considered, but failed to enact, legislation excluding agency employers from the exemption and that this conduct showed Congress did not intend to exclude agency employers from the exemption’s coverage. The panel disagreed: “Failed legislative proposals are a particularly dangerous ground on which to rest an interpretation of a prior statute.”

The panel also rejected “public policy” arguments from the agencies that the DOL was inappropriately changing 40 years of interpretations and making home health care less affordable for individuals, which could result in increased institutionalization and a decline in quality of care. Regarding the change in longstanding interpretation, the panel said that the Final Rule was based on the “dramatic transformation of the home care industry since the third party employer regulation was first promulgated in 1975…. Due to significant changes in the home care industry over the last 25 years, workers who today provide in-home care to individuals needing assistance with activities of daily living are performing types of duties and working in situations that were not envisioned when the companionship-services regulations were promulgated.” The “affordability” argument was also unpersuasive, the panel said. Fifteen states already provide wage protections for home care workers employed by third parties, but there was no data indicating that these protections actually resulted in increased institutionalization or a decline in the quality of care. Thus, “[t]he Department instead reasonably credited comments suggesting that the new rule would improve the quality of home care services.”

Finally, with respect to the DOL’s change to the definition of “companionship services,” the panel found that it had no jurisdiction to rule on this matter. Because the panel had upheld the Final Rule to the extent that it excluded all third-party employers from the exemption, these agencies could not show that they were injured by a narrower definition of “companionship services,” the panel said.

The Home Care Association of America says it doesn’t agree with the appeals court decision and is weighing its options. The DOL says that it stands ready to provide technical assistance to states and other entities as they implement the Final Rule.

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